December 1, 2022

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It is reported that Swedbank expects home prices to fall, and it expects interest rate cuts next fall - E24

It is reported that Swedbank expects home prices to fall, and it expects interest rate cuts next fall – E24

It will be a difficult period of downturn for the Norwegian economy, but we hope to avoid a major crisis, said chief economist Kjetil Martinsen.

Swedishbank chief economist Kjetil Martinsen believes we can afford higher interest rates, but not for long. If all goes as he thinks, home prices will be ten percent off their peak this year.
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Swedbank expects Norges Bank to agree to another 0.50 percentage point jump in interest rates next week to 2.75 percent, and raise the interest rate just before Christmas to 3.0 percent. Then it stops.

They want to prevent high inflation and a tight labor market from fueling wage and price vortexes, says Kjetil Martinsen, chief economist at Swedbank, after the release of brokerage data. Latest Economic Report.

He now sees a clear shift in the economy, and believes Mainland GDPMainland GDP includes production from all industries in Norway, with the exception of oil and gas extraction, pipeline transportation, pipeline transportation and foreign shipping. It will fall 0.5 percent next year, after growth of 3.0 percent this year.

– He says it will be a difficult period of decline for the Norwegian economy, but we hope to avoid a major crisis.

Therefore, Swedbank expects interest rates to be lowered next fall.

We can tolerate higher interest rates, but not forever. Martinsen says the interest rate we have today is already narrowing.

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This has to be the most anticipated downturn in many decades. The chief economist notes that in many ways it is central bank making because central banks see no other way out than to tighten to the point that demand falls and unemployment rises.

Norges Bank itself announced tougher swaps ahead, when the economy weakens and the unemployment rate drops.

In September, the Norges Bank raised the interest rate by 0.5 percentage point to 2.25 percent, the highest level since 2011, and announced further increases in November, December and March.

According to the bank’s forecast from September, the interest rate will reach its peak at 3.0 percent in March of next year. It is then kept unchanged for a long time, before gently dropping back down at the entrance to 2025.

Since then, inflation has been stronger than expected and home prices have fallen.

House price drops by 10 percent

Over the next few months, recent interest rate increases will begin to fully affect your monthly mortgage maturities. That will lead home prices to fall 10% through 2023 from their peak this year, Swedbank estimates.

– The impact of the rapid rise in interest rates that we have seen in the past six months has not yet fully affected the economy, Martinsen says, adding that the interest rate has risen faster than before.

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We are starting to approach the level of interest rates as Norges knows for sure that growth prospects have weakened significantly and we are likely to see more of this in the data points coming in the new year.

Read on E24 +

Eight answers from experts on the interest rate now: How high is the interest rate?

Low wage growth

Swedbank believes inflation will fall from 5.5 per cent this year to 4.6 per cent next year. With wages growing by 4.1 percent this year and 3.8 percent next year, this means a sharp decline in real wages.

Will the staff accept this?

– When unemployment is high and the situation seems noticeably worse in the economy, I think the parties are to blame. They are also fully aware that the higher the wage growth, the higher the interest rates, says Martinsen.

Read on E24 +

This week’s currency shock?

– Coin games we can hardly win

The krone has weakened by nearly 20 per cent against the dollar in the past six months alone.

Swedbank cites the generally uncertain situation in the global economy as one explanation for the krona’s weakness.

The brokerage believes that the dollar will remain strong for some time to come, whether in light of the economic development in the United States or the rise in interest rates from feed itFederal Reserve – US Central Bank. At the end of the year, it is estimated that one dollar will cost 10.90 NOK, about 40 euros more than today.

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All central banks want a stronger exchange rate to curb import price inflation. For the Norges Bank, the problem is not that Norwegian households have floating interest rates, but rather that American households have fixed-rate loans, Martinsen says.

When the interest rate is raised more than other countries, it speaks volumes for a stronger currency.

The Federal Reserve must rise faster and to higher levels to achieve the desired effect on the economy. He says it’s a currency game we can hardly win.

The positive thing is that the Bank of Norway has better control over how much interest rate increases will affect the Norwegian economy.